Cash deposit additions limited to embedded income where account use and record show third-party business dealings.

Cash deposits in a bank account were held not to justify addition of the entire amount as unexplained income where the assessee, a salaried employee, had allowed his brother to operate the account for business dealings and the record showed the deposits were not his own business receipts. The proper course was to tax only the income element embedded in the deposits. On that basis, the Tribunal found estimation at 8% of total deposits reasonable and consistent with the brother's case, and the full addition was not sustained.

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Issues: (i) Whether the entire cash deposits in the assessee's bank account were liable to be added as unexplained income, or only income estimated on a presumptive basis.

Analysis: The assessee, a salaried employee, had permitted his brother to operate the bank account for business dealings. The material on record indicated that the transactions were not the assessee's own business receipts, but the authorities below had treated the whole deposit amount as unexplained. In the circumstances, the appropriate course was to bring to tax only the income element embedded in the deposits. The Tribunal found estimation at 8% of the total deposits to be reasonable and in line with the approach adopted in the brother's case.

Conclusion: The addition of the entire deposit amount was not sustained. The income was directed to be estimated at 8% of the total deposits, in favour of the assessee.

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